by Gary Alexander
November 15, 2022
Fifty years ago this week, the Dow Jones Industrial Index closed above 1,000 for the first time. Therein lies a story of the fear of big round numbers. Almost seven years earlier, on February 9, 1966, that venerable index closed at 995.15 but then it retreated – for six years and nine months. After that long wait, on Friday, November 10, 1972, the Dow finally set a new high by a microscopic 0.11, at 995.26.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The Dow actually traded above 1,000 intraday five times before closing in four figures the first time. Here is a table of the back-and-forth action between 3-digit and 4-digit Dow closings this week 50 years ago:
Then, a funny thing happened. For over two months, the Dow closed above 1,000 each day. In 47 trading sessions, that venerable index set 11 new record highs, including the high point of the 1970s, at 1,051.70 on January 11, 1973, not to be exceeded until November 3, 1982, almost a decade later and, due to high inflation during that decade, not exceeded in real (after inflation) terms until the pre-crash days of 1987.
What was happening then that justified the euphoria, the peak, and then the long slide that followed?
First the peak. November/December 1972 marked the end of an era, in many ways. Here are a few details:
- Richard Nixon won the Presidential election on November 7, with over 60% of the popular vote and the largest electoral college margin to date, 520 to 17 over George McGovern, who did not even win his native South Dakota (he only won Massachusetts and DC). This was Nixon’s last honeymoon before Watergate revelations began the following month, and trials in January 1973.
- We flew our last moon mission. Apollo 17, taking off from Cape Canaveral on December 7, returning on December 19. Gene Cernan and Harrison Schmidt set a record of 75 hours on the moon, the last of 12 U.S. men to walk on the moon (four are still alive, including Schmitt, 87).
- The Miami Dolphins became the first NFL team to go unbeaten and untied in a 14-game regular season, ending December 18. Then they went on to Win Super Bowl VII, a perfect season – when they beat the Washington Redskins, 14-7, in Super Bowl VII, January 14. Tickets were only $15.
- LIFE Magazine died. After 85 years of publication, reflecting the look and feel of America in the middle of the 20th century, the last weekly issue of “LIFE” was dated December 29, 1972. The other big four-letter picture magazine, “LOOK,” had died the previous year, in October of 1971.
As we move into January 1973, the stock market peaked on Thursday, January 11. What happened then?
- President Richard Nixon ended the wage and price control program he began on August 15, 1971. In less than 18 months, the national debt, inflation, and unemployment were contained, but rising steadily. Very quickly, debt and inflation rose much faster after the artificial controls were lifted.
- Also on this date, the trial of the Watergate burglars began in Washington DC. By month’s end, on January 30, 1973, Gordon Liddy and James W. McCord, former members of Nixon’s reelection campaign, were convicted of breaking into the Democratic Party’s Watergate office.
- On January 11, the fall of Western Civilization clearly began when baseball’s American League adopted the (Boo! Hiss!) “Designated Hitter” rule, so that pitchers no longer needed to bat.
By month’s end there was some big news about the end of one war and the beginning of another. The Dow’s final day over 1,000 for 1973 was Friday, January 26. That week began on Monday, January 22, with the death of the controversial former President Lyndon Baines Johnson, and the Supreme Court ruling on Roe v. Wade. The week ended on Saturday, January 27, with the official end of America’s role in the Vietnam War, and the end of the mandatory military draft, but it also marked the first conviction of Watergate criminals, so one series of national nightmares was ending, and a new series was beginning.
So…Are You Better Off Since 1972?
All my life, I have heard doomsday prophets and economists-of-scarcity say that “wages peaked in 1972” and real wages have declined ever since. They ignore all the added benefits, the fewer hours worked, the new self-directed pension plans (401k’s), rising market assets, real estate gains, and the obvious fact that we don’t work the same job we worked in 1972. They also use the Consumer Price Index (CPI), which is the most inflated of several measuring sticks (the Fed’s PCE Inflation Index is much more moderate).
Putting all that aside, I look at the home I bought in August 1972 in Pasadena, California, just before the birth of our third (and final) child. It cost us $19,500 ($500 down). It was most recently valued at over $1.1 million. We sold it in 1979 for $79,500 and thought we better get out of town fast before somebody discovered our “perfect crime.” Look at some of the other basic asset indicators over the last 50 years. *
*Let me first make an adjustment for inflation, using the bloated CPI. The CPI-U stood at 42.4 in November 1972 (with 1982-84 = 100). It stands at 298 as of October 2022. That’s a 7-fold price deflator, which I will use below:
50-Year Gains in Major Asset Classes – Adjusted for Inflation
In a nutshell, yes, we are 81% better off in real GDP per capita. Our stocks (or gold) are up 30-fold in nominal terms or four to five times better in real terms. Your gasoline costs are only up about one-third as much as the cost of a barrel of oil, due to efficiencies by the energy companies. Your home (like mine) may be up 50-fold, or is bigger, with more rooms – and your nifty computer didn’t even exist in 1972.
Good Riddance to Airline Hijackings, Campus Riots, Domestic Bombings, and The Ice Age
Some things are different. In 1972, we worried about airplane hijackings, not school shootings. There was a Southern Airways DC-9 plane hijacked in Alabama on November 10, 1972. It was taken up to Canada then down to Cuba during a three-day nightmare. Then a plane was hijacked in Australia on November 14. There was an average of over one airline hijacking per week from 1969 to 1972, and 60 in 1972 alone.
Also, there were campus riots almost every week and domestic terrorist bombings. According to FBI statistics, the United States experienced over 2,500 domestic bombings during just 18 months in 1971 and 1972 (about four to five per day), with virtually no solved crimes and barely any significant prosecutions.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
We also worried more about global cooling – and a coming ice age – than global warming. I worked in a News Bureau as Director of Research that fall of 1972, where I was in charge of collecting “bad news” clippings for a noted radio/TV commentator. In 1972, we did a program on the “coming ice age” based on clippings I provided from reputable sources citing NASA data (like the July 9, 1971, Washington Post, “Scientist Sees New Ice Age Coming” in 50 to 60 years). There were several other clippings like that.
I was familiar with the data, having gone to environmental and ecological conferences post-Earth Day. The earth warmed from the 1880s to 1940s, but then it cooled from 1950 to 1975 before warming again. In the early 1970s, all we knew was the cooling trend. The term “global warming” did not appear in print until the August 8, 1975, edition of Science. By then, I was near the end of my tenure with that outfit, when the famous radio/TV personality asked me, “Well, Gary, which is it – are we cooling or warming?”
“Well, sir, with any luck, we’ll have equal amounts of both, and we’ll have nothing to worry about.”
He was not amused. That’s when I knew my days on that job were numbered. I left the following winter.
True story. Now we face a winter in Europe when many may freeze to death based on political actions in thrall to extreme global warming theories. You can’t make this stuff up – but they keep trying!
All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.
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The Fed Finally Caused the “Complete Inversion”
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About The Author
Gary Alexander
SENIOR EDITOR
Gary Alexander has been Senior Writer at Navellier since 2009. He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks. For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.
Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s. He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division. Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander
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